Rising healthcare premiums are a bottom-line problem. More importantly, they are a talent acquisition and employee retention problem. You’ve seen dozens of headlines. So have your employees. Healthcare premiums are expected to rise sharply for both employer-sponsored benefits and ACA plans. Basically, the cost of U.S. health insurance is expected to jump significantly due to soaring demand for care, higher labor costs, and expensive medications like the GLP-1 weight-loss drugs.

For employers, the cost comes at a delicate moment: many employees explore new job opportunities early in the year, and benefits play a major role in those decisions. Letting rising costs go unchecked can directly impact employee satisfaction, retention, and a company’s reputation as a place for new talent.

A risk to employee satisfaction

When premiums increase, employees feel it long before employers do. And it comes from premiums, higher deductibles, co-pays, and out-of-pocket costs.

• Job searches peak in Q1. Higher costs can be the tipping point when employees explore new roles.
• Benefits can determine feelings about employer support. When it shifts to employees, it can feel like the company is not honoring their commitment to employee well-being.
• Financial stress impacts performance. Medical debt and surprise bills are a major contributor to disengagement and burnout.

Not having anything nice to say about the benefits at a job is one of the fastest ways to lose talent.

How employers are responding: The rise of voluntary benefits

We’ve talked about the trend of voluntary benefits (check out episode 4 of our podcast) in detail. As premiums go crazy, many employers turn to voluntary benefits to fill gaps without dramatically increasing employer costs. These add-on benefits can make employees feel like they are getting more for their money and commitment, even when the core medical plan becomes more expensive.

• Cost-effective value: Supplemental health plans like hospital indemnity, accident, and critical illness help offset high deductibles and unexpected expenses.
• Employee choice: Voluntary benefits let employees customize their protection based on budget and personal risk.
• Competitive differentiation: A strong voluntary offering can boost overall benefits satisfaction, even when medical costs rise.

Are voluntary benefits a smart strategy?

Maybe…but only with the right oversight. They’re not a replacement for strong core benefit packages.  Employers should be careful here.

• Education is critical – If employees don’t understand how voluntary benefits work, they won’t see the value.
• Plans vary widely – Some are high-quality; others are not. A fiduciary lens is essential when choosing vendors.
• Money matters – Employees pay for most voluntary benefits. So employers should ensure the plans truly address common financial risks. And if employers are covering costs, the same compliance oversight as medical benefits come into play.

When implemented well, voluntary benefits can help offset rising medical costs. They can’t erase them, but they can give employees some choice and more holistic coverage.

Healthcare costs will continue to rise, and employees are paying attention. To protect satisfaction and retention, employers need a strategy that makes it clear they have their team’s back while keeping an eye on the compliance of evolving benefit packages.

Read more about the surge in healthcare costs.